Biotechnology Regulatory Policy

In the United States and some other parts of the world,
agricultural biotechnology has allowed the development of
innovative plant technologies that have reduced production costs
and improved farmer incomes, enhanced quality attributes desired by
end-users, and provided environmental benefits in the form of
reduced pesticide use. In India, however, only one of the many
available genetically modified (GM) genes-the Bt gene used in
cotton-has been approved for cultivation by the Government of
India. The adoption of hybrid Bt cotton has contributed to the
rapid growth in Indian cotton yields and output since the early
2000s. So far, however, the Government has struggled to build
consensus for a more transparent, science-based regulatory
framework to govern agricultural biotechnology, thus slowing the
development and spread of new GM varieties, compared with efforts
of some other countries.

Using funds from USDA's Emerging Markets Program, ERS has
contributed to research on various aspects of biotechnology
regulation in India, including India's regulatory system for GM
crops, the costs of GM crop regulation compared with those of other
countries, and the impacts of Bt cotton adoption on seed markets
and the use of pesticides in India. Published research from this
project includes:

"Pesticide Use Pattern among Cotton Cultivators in Gujarat," N.
Lalitha and B. Ramaswami, in Frontiers of Agricultural Development
in Gujarat, R. H. Dholakia, editor, Centre for Management in
Agriculture, Indian Institute of Management, Ahmedabad, 2007, pp
77-98.

Economics of Cotton Quality in
India

India is among the world's largest producers of cotton and
textiles, and these sectors are increasingly competitive in global
markets following the removal of international trade restrictions
that existed under the Multi-Fiber Arrangement, recent reforms to
domestic textile policies, and rapid gains in cotton production due
to adoption of hybrid Bt cotton. Although higher cotton output has
led to sharply higher exports of raw cotton, the demand for more
high quality cotton-free from trash and contaminates-from some
Indian textile and garment manufacturers has led to continued
imports of quality cotton from the United States and other
suppliers. Reflecting the traditional lack of attention to quality
in India's domestic market, the International Textile
Manufacturer's Federation has found Indian cottons to be among the
most contaminated in the world. Ongoing ERS research is examining
the role of quality characteristics in India's cotton market and
the extent to which the marketing system is adjusting to quality
needs of the increasingly export-oriented textile sector.

Developing Country Modern Food
Retailing Study

Responding largely to the opportunity afforded by rising incomes
and urbanization, domestic and multinational chain retailers are
expanding their share of food sales in many developing countries,
with potentially significant implications for food demand and
trade. In some cases, chain retailers introduce supply chain
efficiencies that can influence demand patterns by reducing
consumer prices for some foods. Because developing country
consumers often spend relatively large shares of income on food and
are relatively responsive to price changes, significant food cost
reductions could trigger economywide impacts on investment, output,
and demand. In other cases, chain retailers may focus on
introducing enhancements in food quality, safety, and shopping
convenience that appeal particularly to higher income consumers.
Finally, there may be direct influences on demand for imported
food, as chain retailers strive to improve the diversity, quality,
and safety of their offerings; reduce the cost of imported foods
due to greater supply chain efficiencies; and provide a more viable
platform than do traditional unorganized retailers for promoting
new products. To the extent that investment in chain retailing in
developing countries strengthens food demand, including demand for
imported foods, these investments complement, rather than compete
with, efforts to expand U.S. exports.

Ongoing ERS research is examining the implications of modern
food retailing for food demand and trade across several developing
and transition countries, including India, Brazil, China,
Indonesia, and Russia. These countries provide a useful diversity
of economic and policy environments for study of the modern chain
food retailing phenomenon.

Investing in India's
Agricultural Markets: A Source of Growth and Equity?

India's high agricultural tariffs and growing farm subsidies
have received much attention, but the implications of domestic
policies that have discouraged agribusiness investment and created
inefficient domestic markets have received less attention. This
research examines the potential impacts of improvements in
marketing efficiency that might be associated with reforms leading
to increased private investment in agricultural markets and
agribusiness. Results are compared with those of more "traditional"
reform scenarios involving elimination of agricultural subsidies
and tariffs. The analysis uses a computable general equilibrium
framework that accounts for the impacts of changes in food
expenditures and farm output associated with increased marketing
efficiency, as well as the distributive impacts of urban and rural
households by income class. The results suggest that improved
agricultural marketing efficiency could yield substantial
economy-wide gains in income and employment, positive price impacts
for both producers and consumers, and distributional gains favoring
low income households. See Investing in India's Agricultural
Markets: A Source of Growth and Equity?

Estimates of Supply Response for Major Indian
Crops

New econometric estimates indicate that production of major
crops in India has become more responsive to changes in output
prices during the post-reform period. The estimates, using Indian
state level data for 1970/71-2004/05, show that area response for
most crops has increased 20-40 percent since the economic reforms
of the early 1990s. For cereal crops, yield response to price
changes is shown to now be larger than area response, indicating
that farmers are increasingly responding to price incentives by
adjusting use of non-acreage inputs rather than crop area.

Estimates Agricultural Policy
Reform

Faster economic growth, weak farm sector performance, and
political changes in India have brought agriculture to the center
of policy discussions, but it has been difficult to reach consensus
on the reform agenda. Developments since the early 1990s highlight
the need for consensus in several areas, including separation of
producer price stabilization and income support policies, change in
trade policies that tax producers or constrain emergence of
competitive domestic markets, and reform of a web of regulatory
measures that impede domestic and foreign private investment in
market infrastructure and agribusiness.

Reference:

Irradiation for the Mitigation of
Pest Risks from Imported Fruit and Vegetables

Expanding U.S. import demand for fresh fruits and vegetables
gives rise to concerns with adequately addressing risks to U.S.
producers and consumers associated with invasive and non-native
insect pests-or quarantine pests-that may enter the country along
with fresh produce. Examples of invasive pests borne on imported
produce that imposed significant costs on U.S. agriculture include
the outbreaks of various species of fruit flies beginning in the
1970s. A substantial and growing share of U.S. fresh produce
consists of new products sourced from a diverse set of developing
country suppliers, creating demand for new pest risk mitigation
strategies and treatments that can be applied and adequately
verified in those environments.

Irradiation, a post-harvest treatment that can neutralize a
range of quarantine pest and food safety problems, that maybe
reliable and cost-effective relative to other options in
facilitating access of fresh produce into the U.S. market.
Since 2006, irradiation has been certified by USDA as an effective
quarantine treatment against a range of pests. Further,
irradiation may prove to be a viable and cost-effective approach
for addressing pest problems for developing country suppliers where
the alternative may be substantial changes in production and
handling that are difficult to implement and, particularly, to
enforce.

This study will document recent growth in U.S. imports of fresh
produce, characterize the pest risks associated with food imports,
and assess the potential applicability of irradiation technology.
It will then examine the economic costs and benefits of irradiation
using a case study of Indian mango exports to the United States.
This research is being conducted in cooperation with Virginia
Polytechnic and State University (Virginia Tech).

Scenarios for Indian
Agriculture

The environment for Indian agriculture and Indian agricultural
policy has changed significantly since the onset of rapid economic
growth in the early 1990s. Rapid growth in incomes and urbanization
are now strengthening and diversifying consumer demand and placing
pressure on existing production systems, marketing institutions,
and infrastructure. Increased trade openness is challenging
policies and structures that were established in a closed
economy.

Alongside the accelerating growth and investment in India's
industrial and service sectors, agriculture has, in most respects,
been faring poorly. Yields of most crops remain well below world
averages, and output and yield growth have been slowing. Budget
outlays for subsidies on food grains and farm inputs have been
rising, while investment in agriculture and agribusiness remains
low-in part due to restrictive regulatory and trade policies.
Although it has proven difficult to transform Indian agricultural
policies-with only modest reforms in recent years-further changes
in policies, investment, technology, and market structures could
have significant impacts on global an U.S. agricultural markets for
a number of major crop and livestock commodities.

The goals of this project are to identify the key areas where
Indian domestic and trade policies are most likely to change, and
analyze the implications of those changes for global and U.S.
markets. Areas likely to be addressed include tariff barriers,
domestic price support policy, input subsidies, technical change,
consumer subsidies, feed demand, and structural change in domestic
markets. The simulation model will be built with the ERS
Excel-based multi-commodity spreadsheet model-builder. The model
will be compatible with the ERS baseline modeling system and
capable of both standalone (exogenous reference prices) or linked
(endogenous reference prices) solution. Primary data sources will
be USDA, FAO, and the Government of India.

India Productivity Analysis

An ERS research project on global agricultural productivity
focuses on the ability of agriculture to provide for the growing
global demand for food, feed, fiber, and fuel needs through
advances in agricultural productivity. In poor, agrarian developing
countries, raising the rate of agricultural productivity growth is
essential for poverty reduction and food security. For middle- and
upper-income countries, success or failure in sustaining growth in
agricultural productivity will have major consequences for
agricultural trade patterns, natural resource conservation, ability
to address climate change challenges, and, in some cases, political
stability. The project objective is to improve understanding of the
patterns of international agricultural productivity growth, and how
different factors - including government policies - influence
productivity trends. The project will develop new methods and data
sources to extend and improve estimates of global and country-level
agricultural productivity through 2005 and beyond; analyze
policies, institutional, and environmental factors that affect
productivity; and examine the implications of the research findings
on future agricultural trade, environmental impact, and food
security.

Current plans are to study agricultural productivity growth in a
number of major countries, including India, as well as Brazil,
China, and the Former Soviet Union. The India research is in
process and is being conducted in cooperation with the
International Food Policy Research Institute.

Despite rapid economic progress and reduced incidence of poverty
since the early 1990s, India continues to encompass the largest
share of the world's poor and food insecure population. Economic
performance, agricultural policies, and governance factors have
varied substantially across India's 26 states, as has progress in
reducing poverty. Growth in incomes and employment are likely to be
key determinants of poverty impacts, but impacts may vary depending
on whether growth is in the agricultural, services, or
manufacturing sectors. The performance of agriculture, which is the
primary source of income for nearly 60 percent of the population,
is likely to play an important role in poverty outcomes. Because
agricultural policies can vary by state in India, differences in
farm sector performance, poverty, and food security outcomes may
also be associated with variations in policies. Additionally,
progress in achieving food security goals may be affected by
governance factors, including the consistency of elected state
governments, or the influence of electoral cycles on economic and
agricultural policies.

This study will exploit variations in economic growth, poverty,
policies, and governance across India's states, by drawing on a
large, multi-year dataset on Indian households. The study will use
data from National Sample Survey Organization (NSSO) "large sample"
rounds for 1987, 1993, 1999, and 2005, which include extensive
information on household employment, expenditures, and program
participation. Additional sources will include farm production data
from India's Ministry of Agriculture, state economic growth data
from India's Ministry of Statistics and Program Implementation,
policy data from Indian state government sources, and official
Indian elections data. Analysis will be conducted with standard
econometric techniques to be determined.